In Speculation trading there is no ‘sale’ or ‘turnover’ effected within the meaning of S. 44AB

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IN THE ITAT PUNE BENCH ‘B’

Banwari Sitaram Pasari HUF

v.

Assistant Commissioner of Income-tax

IT Appeal No. 1489 (PUNE) of 2011

[Assessment year 2006-07]

November 22, 2012

 

It is noted that the assessee is engaged in the business of on-line trading of commodities and in this speculation activity, there is no physical delivery of commodities given or taken. Whether there was any element of ‘turnover’ in such activity is the bone of contention between the assessee and the revenue. In somewhat similar situation, co-ordinate Bench of Mumbai Tribunal in the case of Growmore Exports Ltd. v. Asstt CIT [2001] 78 ITD 95 has dealt with requirement to get the accounts audited under section 44AB. In this case the assessee was engaged in the speculation transaction of sale and purchase of units without taking delivery and the account was settled by crediting the difference. The Tribunal after considering section 18 of the Sale of Goods Act, 1930 observed that no property in the said units passed on to the assessee inasmuch as the assessee never acquired the property in the units as the units contracted to be bought were future unascertained goods. Similarly, it could not pass on the property to the party to whom the units were contracted and therefore, there was no ‘sale’ or ‘turnover’ effected by the assessee in the legal sense for the purposes of getting the accounts audited under section 44AB.

In the instant case also, the transaction of buying and selling of commodities is a speculative activity where no physical delivery is taken or given and in this view of the matter. It is held that there was no turnover constituted in the amount of Rs. 1,86,66,488 for the purposes of considering the liability of assessee to get the accounts audited under section 44AB and, hence, there was no requirement to get the accounts audited under section 44AB. Thus, the penalty under section 271B imposed by the Assessing Officer is hereby directed to be deleted.